Correlation Between Alfa Financial and PT Indofood
Can any of the company-specific risk be diversified away by investing in both Alfa Financial and PT Indofood at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Alfa Financial and PT Indofood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alfa Financial Software and PT Indofood Sukses, you can compare the effects of market volatilities on Alfa Financial and PT Indofood and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Alfa Financial with a short position of PT Indofood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alfa Financial and PT Indofood.
Diversification Opportunities for Alfa Financial and PT Indofood
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Alfa and ISM is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Alfa Financial Software and PT Indofood Sukses in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PT Indofood Sukses and Alfa Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Alfa Financial Software are associated (or correlated) with PT Indofood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PT Indofood Sukses has no effect on the direction of Alfa Financial i.e., Alfa Financial and PT Indofood go up and down completely randomly.
Pair Corralation between Alfa Financial and PT Indofood
Assuming the 90 days trading horizon Alfa Financial is expected to generate 2.5 times less return on investment than PT Indofood. But when comparing it to its historical volatility, Alfa Financial Software is 1.08 times less risky than PT Indofood. It trades about 0.06 of its potential returns per unit of risk. PT Indofood Sukses is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 44.00 in PT Indofood Sukses on September 12, 2024 and sell it today you would earn a total of 3.00 from holding PT Indofood Sukses or generate 6.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Alfa Financial Software vs. PT Indofood Sukses
Performance |
| Timeline |
| Alfa Financial Software |
| PT Indofood Sukses |
Alfa Financial and PT Indofood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Alfa Financial and PT Indofood
The main advantage of trading using opposite Alfa Financial and PT Indofood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alfa Financial position performs unexpectedly, PT Indofood can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in PT Indofood will offset losses from the drop in PT Indofood's long position.| Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc | Alfa Financial vs. Apple Inc |
| PT Indofood vs. AUSTEVOLL SEAFOOD | PT Indofood vs. Direct Line Insurance | PT Indofood vs. QBE Insurance Group | PT Indofood vs. ZURICH INSURANCE GROUP |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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